Yes, I will ask my accountant...

With that said, how do you handle cash bonuses?

One of my clients that's no longer reachable was/is doing something I've always wanted to do; he's giving his employees cash bonuses few weeks before Christmas time.
His belief is that giving someone $1,000 bonus as a processed payroll check with taxes, 401k contributions, loan repayments and other deductions taken out may result in $300-500 take home.

From what he told me, he would take out 30-50k in cash and give valued employees envelopes with cash. Nothing to sign, nothing to report, Merry Christmas.

In this scenario, how do you think this was handled? Would this be an owner's draw which would then show up as his taxable income?

If you are using an accountant , you are going to have to keep it on the books because they aren't going to do anything that would get them in trouble.

My buddy is a roofer and it was always funny listening to him try to get his accountant to find a way to write off his Lamborghini, viper, Porsche and 2 trucks as expenses for the business.

Just pull out the cash and chalk it up as the wife went shopping. ;)

How do larger companies deal with things like giveaways to employees, perfect attendance gift cards and restaurant/movie certificates?

Those never show up on employees pay stubs.

Hire a pro bookkeeper.

[Link: irs.gov]

Hey Mario,

I haven't received a white envelope in the mail yet with a NM address, it's coming right???

;)-

Do you have a column for Misc Expenses or Petty Cash?

Paying tax on a bonus sucks, but they still benefit from the remaining amount- it still adds to their FICA contribution, although it is possible to have each employee fill out a W-4 form, to change the amount of tax on one pay check, up to four times each year. If they want to pay nothing, the usual amount or one penny, it's up to them.

You could also work with them to adjust the amount of tax withheld on their usual checks, too. The ones who always receive a large refund and constantly complain about never having enough money during the year would benefit from increasing the number of dependents on their W-4. If they prefer to keep the same number, it's their choice. As an employee, I always liked having the money during the year and paying or receiving a small amount at tax time.

I imagine a good accountant will help you find a way.
Just as he might help you when dealing with a client that might want to pay you in cash.

Unless you are doing cash jobs and saving it for year end bonuses, then I would just put it on the check. If someone ever came knocking, the employees would be on the hook for paying those taxes. Unless they are stock holders of your company were you could consider this as a distribution. They will still be responsible for some taxes but not all.

As mentioned, discuss with your accountant.

Could your clients use of cash have anything to do with why he isnt reachable any more?

When my grandfather was alive, he gave my mother and her 3 siblings money for Christmas every year. But he ran it through one of his companies as payroll, so it always had taxes withheld. Nothing says I love you like making sure Uncle Sam gets his cut of your kids' christmas present.

What kind of roofer has a lambo, Viper, and porsche?

Family is a different situation. There is a gift tax exclusion for family members up to a certain amount.

Wrongo!

I see items on my stub to account for those kinds of things.

Here's the IRS rules on what you can give away, and not account for, and what you are supposed to account for.

[Link: irs.gov]

He's a really good salesman. LOL
An average sales guy can easily make $200k working 6 months. He typically works year round in numerous states with teams of sales guys working for him.

If you want them to get $1000, then have your bookkeeper back in the taxes, etc. and give them a payroll check for the gross amount of $1,327.16 (example) and they end up with a net of $1000. Put it on a separate check from their payroll, so they can just go cash and don't have to hand it to the significant other to deposit with the paycheck.

Everyone is happy!